ASX rallies late to extend new year gains

Australian shares rallied late on Thursday to close higher for a fourth straight session, the market's best run since early November.

The S&P/ASX 200 Index closed 17 points, or 0.3 per cent, higher at 5796.3 while the broader All Ordinaries climbed 15.5 points, or 0.3 per cent, to 5854.9.

"It's been a reasonable start to the year," said Atlas Funds Management chief investment officer Hugh Dive. "We're still in that quiet period [before earnings season] where macro factors will have a big impact. We were down a bit earlier today but there's a big impact of BHP going ex-[dividend] so it was pretty flat actually."

Australian shares were mixed on Thursday. Brendon Thorne

The major banks rallied from a fall in the middle of the day to close the session slightly higher. Commonwealth Bank rose 0.2 per cent to $72.45, Westpac climbed 0.4 per cent to $25.85, ANZ advanced 0.6 per cent to $25.33 and NAB closed 0.1 per cent higher at $24.60.

A strong jump in the price of crude oil on Wednesday lifted energy stocks during early trade on Thursday, however they pared their gains later in the session as prices fell. Woodside Petroleum closed the session 0.7 per cent higher at $33.37, Beach Energy climbed 3 per cent to $1.57, Santos lifted 0.7 per cent to $5.85, Origin Energy advanced 0.1 per cent to $6.95 while WorleyParsons closed 0.5 per cent lower at $13.39.

Treasury Wine Estates shares closed 4.8 per cent lower at $14.25. The company announced just after market close that its earnings for the first half of 2018-19 would be above consensus forecasts, within the range of $335 million and $340 million.

Stock watch

Woodside Petroleum

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Morgans upgraded its recommendation on Woodside Petroleum from 'hold' to 'add', and lifted its target price too, following the recent share price weakness across the energy sector. The broker said the company had an exceptional earnings margin against its global major peer group, further supported by its low risk operating asset base. "We see Woodside as a safe pair of hands in a sector that has been oversold," said analyst Adrian Prendergast. "In our view Woodside offers a sector-leading earnings profile coupled with a healthy balance sheet and friendly dividend policy. We see Woodside in a unique position to weather ongoing volatility while positioning itself for its next leg of growth." Morgans lifted its target price on Woodside from $36.74 to $37.83.

What moved the market

Coal Exports

Australian exports of thermal and metallurgical coal climbed to a more than two year high in the first week of January according to Global Ports data in coal flows compiled by Bloomberg. Australian exported 9.52 million tons of coal through the week of January 4, the highest level since November 2016. The increase was driven by a surge in imports to South Korea, with the republic importing 3.29 million tons during the same week, its highest level in at least the last five years. Australia accounts for more than a third of global coal exports.

US crude

US crude prices rose by more than 5 per cent on Wednesday after Saudi Arabia reassured the market it would continue to keep prices higher, even if it meant further cuts to production. The price of West Texas Intermediate rose 5.2 per cent to $US52.36 on Wednesday after Saudi Arabia said it would help keep oil markets balanced, implying they would do whatever it takes to keep prices elevated. Stockpiles in the US also fell slightly less than expected last week and downstream conditions point to a potential surplus, with US gasoline and distillate stockpiles increasing above expectations.

Aussie dollar

The Australian dollar has continued its recovery from last week's "flash crash" to be trading above US71.5¢. The Aussie dollar reached a high of US71.9¢ in the early hours of Thursday but slid slightly through the rest of the day. The US dollar has been weakened by the positive sentiment surrounding trade talks between the US and China. The office of the United States Trade Representative announced on Wednesday China had pledged to "purchase a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States."

Retail sales

CBA believes Christmas retail spending during 2018 was weaker than in previous years, although they acknowledged the changing spending calendar, driven by big sales in November, made comparisons difficult. "The run up in sales activity in the 2018 pre-Christmas trading period lagged behind 2017. And behind the average experience over the past decade or so," said chief economist Michael Blythe in a note on Thursday. "The value of online sales of electronic equipment over the four days from Black Friday to Cyber Monday was 205 per cent above the typical November daily spend. On the same basis, clothing and footwear sales were up 127 per cent."